BUSINESS ADMINISTRATION
BUSINESS ECONOMICS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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The amount of available resources measured in relation to access to the capital markets
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Enables the business to replace one type of capital for another
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The sensitivity of the demand of capital to changes in interest rates
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None of the above is correct
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Detailed explanation-1: -Financial flexibility is defined by Gamba and Triantis (Journal of Finance 2008) as “the ability of a firm to access and restructure its financing at a low cost.” Flexibility lessens the underinvestment problems if access to capital is limited and helps to avoid financial distress.
Detailed explanation-2: -Survey studies have shown that a CFO’s top priority when determining the capital structure is maintaining financial flexibility – the firm’s ability to borrow funds to take advantage of new investment opportunities or sustain ongoing projects when they need to.
Detailed explanation-3: -Financial structure refers to the mix of debt and equity that a company uses to finance its operations. This composition directly affects the risk and value of the associated business.
Detailed explanation-4: -Your Unit linked Insurance Plan is linked to the capital market and offers you flexibility to invest your units in equity or debt funds depending upon your risk appetite. ULIPs are typically bought for long term capital gains and offer a protection cover too.